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June/July 2010

MAY REVENUE (in millions): SALES TAX: $1,781.4 OIL PRODUCTION: $89.9 NATURAL GAS: $105.7 MOTOR FUELS: $258.5 MOTOR VEHICLE SALES: $196.6 TOBACCO: $111.8

Improving MPG

“Manufacturers are getting a lot more horsepower as well as fuel economy out of smaller engines.”

– Ray Huffines

What's driving Texans to more fuel-efficient vehicles?

by Gerard MacCrossan

Fluctuating fuel costs are a fact of modern life, and drivers across Texas remember the gasoline price surge of 2008 all too well.

But whatever the economic climate, Texas auto buyers still consider function as well as running costs when buying new vehicles.

Ray Huffines

So far in 2010, Texans are still buying more full-sized trucks than any other type of new vehicle and, despite swinging gasoline and diesel prices, truck registrations (including SUVs and vans) still accounted for about a third of all Texas vehicles on the road in fiscal 2009.

Even so, we may be seeing tentative moves toward greater fuel economy. Automotive publisher Edmunds Inc. estimates that the market share for full-sized trucks — a Texas icon — has slipped a little over the past five years, from almost 25 percent of all vehicles in the first quarter of 2005 to 22 percent in the same quarter of 2010.

North Texas car dealer Ray Huffines says the days of selling Tahoes, Suburbans and full-sized pickups to people more for looks than necessity may be coming to an end.

“Some people bought them just because they liked them, but they won’t go away completely, because many people still need them,” Huffines says. “When gas went to almost $4 per gallon, that definitely changed people’s buying habits. Now a lot of those people have moved to something else.”

Texans are still buying more full-sized trucks than any other type of new vehicle.

MPG Rises

Edmunds’ first-quarter comparison of retail vehicle sales in 2005 and 2010 shows that Texas buyers are moving toward fuel-efficient models. In the past five years, Texans have become more likely to choose subcompact cars and less likely to buy trucks, large cars and vans.

Texas’ Favored Hybrids

AS OF 1/11/2010
Toyota Prius31,026
Honda Civic9,926
Toyota Camry8,851
Chevrolet Silverado5,861
Lexus GS450H4,764

Source: Texas Department of Motor Vehicles

Edmunds’ statistics show that total Texas vehicle sales in first-quarter 2010 reflect an 8.8 percent improvement in average gas mileage versus vehicles sold in the same quarter five years before.

“Miles per gallon is of huge concern to the automakers,” says Ivan Drury, an Edmunds analyst, and they have improved fuel efficiency in most vehicle types.

Interestingly, the three categories with the biggest mileage improvements all were SUVs — compact, large and luxury models. Most improved was the compact SUV group; vehicles sold in 2010 average 21.7 miles per gallon (mpg), 13.4 percent more than for those sold in 2005.

SUVs also saw the largest increase in Texas market share between 2005 and 2010. Total market share for all SUVs combined (the three categories cited above as well as midsize vehicles) increased to 30.1 percent in first-quarter 2010, pushing ahead of trucks’ market share of 24.5 percent.

Fuel efficiency improvements were lower among trucks. Compact trucks sold in first-quarter 2010 averaged 17 mpg, for a five-year increase of just 2.5 percent, while full-sized trucks saw a 7.9 percent mileage increase, to 15.9 mpg.

Vans (excluding minivans) were the only vehicle category that saw a drop in average miles per gallon over five years, and their market share plummeted to just 0.3 percent of vehicles sold in Texas.

Shifting Preferences

Factors including individual taste and fluctuating gasoline prices have prompted Texas vehicle buyers to alter their choices in recent years.

Texas Passenger Vehicle Retail Sales.  Market share by vehicle segment.
Midsize Car
Luxury Car
Midsize SUV
Luxury SUV
Full-sized Truck

* Market share by year may total less than 100 percent due to rounding.

Source: Edmunds Inc. and Texas Comptroller of Public Accounts

Pushing the Boundaries

Current trends in market share, however, could be changed by breakthroughs in fuel efficiency.

To sell vehicles, rival automakers are continually advancing design and engineering. They have to keep pushing the boundaries, Drury says. “One of the simplest ideas — and most expensive — is to lighten the vehicle,” he says. “Replace iron with aluminum. But that’s very costly right now.”

Certainly, redesigning vehicles has helped attract customer attention. The original SUVs were built on truck platforms and drove like trucks.

“There has been a move for several years to go to car platforms [for SUVs], usually front-wheel drive,” says Huffines. “They have lighter weight and better fuel mileage. But they look alike and have capabilities that fit most customers’ needs.”

Huffines is a third-generation car dealer, running the company started in Denton by his grandfather in 1924. The company has expanded from its original Chevrolet franchise and now sells Chrysler, Jeep, Dodge, Hyundai, Kia and Subaru from eight stores in Plano, Lewisville, McKinney and Denton.

“Manufacturers are getting a lot more horsepower as well as fuel economy out of smaller engines,” Huffines says, noting that cars that might have had a V6 in previous years now obtain the same power from more fuel-efficient, four-cylinder models.

“Transmissions have gone from three-speed to four-speed and now even five- and six-speed automatics,” he adds. “An added benefit of smaller engines, of course, is that they’re lighter, too.”

Hybrids Rising

But lighter vehicles grab fewer headlines than higher-tech solutions, and hybrid gasoline-electric engines have gained the most attention in recent years.

According to the Texas Department of Motor Vehicles (DMV), 78,000 hybrid vehicles were registered in the state as of January 2010, 10,400 more than in the previous year.

In 2004, only 5,100 hybrids were on Texas roads, two made by Honda and a Toyota model. Today, 21 models are available, with the Toyota Prius accounting for almost 40 percent of the Texas total. But American automakers aren’t completely out of the market, with about 10,000 General Motors and Ford hybrids registered here, mostly trucks and SUVs.

Hybrid vehicle sales weren’t immune from a big drop in auto sales Texas dealers endured in 2009, the first full year of the recession. From January 2008 to January 2009, Texans registered about 14,200 hybrids, substantially down from the 19,700 hybrids first registered in 2007.

The number of hybrids in Texas continues to rise, although they still represent just 0.5 percent of the 17 million cars and trucks on Texas roads.

Current hybrid technology offers better fuel efficiency than most traditional gas-powered vehicles, but the margin of improvement varies widely among models. Edmonds data indicate that hybrid technology makes the most difference to the Honda Civic. Its hybrid version gets about 13 miles more to the gallon than the conventional model, a 45 percent boost. The hybrid Chevrolet Silverado pickup, by contrast, is only about 25 percent more fuel- efficient, gaining five to seven mpg on its conventional V8 stable mates.

And of course, hybrids come with a bigger sticker price. At more than $23,000, the Civic hybrid costs about 50 percent more than the conventional Civic four-door sedan. A base-model Chevrolet Silverado crew cab hybrid stickers at more than $38,000, $8,000 (or 27 percent) more than the V8- powered non-hybrid base model.

The Next Big Thing

According to Drury, current hybrid technology is more of a placeholder for fully electric cars. In the meantime, more sophisticated hybrids are on the way.

Volt will offer
“plug-in” recharging from home outlets.

In current hybrids such as the Prius, the electric motor and gasoline engine work more or less in tandem; the electric motor takes over when the car is idling, for instance, and the gasoline engine recharges the electrical motor’s battery as it runs. A newer generation of hybrids, such as the Chevrolet Volt due in showrooms in late 2010, will be capable of electric-only driving, with a promised range of 40 miles between charges. And the Volt will offer “plug-in” recharging from home outlets.

“There will be some early adopters but there are a lot of unknowns, including cost,” says Huffines. “Will you have to get something done at your house [to use the plug-in feature]? There are still a lot of questions.”

On April 1, 2010, the National Highway Traffic Safety Administration (NHTSA) and the Environmental Protection Agency issued new standards for automakers that require an annual 5 percent reduction in vehicle emissions between the 2012 and 2016 model years, and an overall average of 34.1 mpg for new vehicles on sale in 2016.

This goal calls for new technology as well as continuing fuel-efficiency improvements. But NHTSA estimates that the new standards will save consumers an average of $3,000 over the lifetime of a new vehicle, with fuel savings offsetting upfront technology costs.

Out of the Trough?

One of many signs of the downturn is the fact that Americans are hanging on to their vehicles longer. According to automotive research firm R.L. Polk, the average length of vehicle ownership among U.S. consumers was 49.9 months in September 2009, up from 45 months in September 2008.

And 2009 saw the lowest volume of new vehicle sales nationwide in almost two decades. “Normal” annual U.S. sales volume is 16 to 17 million vehicles, says Edmunds’ Drury. In 2008, dealers sold slightly more than 13 million vehicles, and only 10.4 million in 2009.

According to DMV, the all-time peak for new vehicle registrations in Texas came in fiscal 2007, when Texas drivers added more than 500,000 passenger cars, trucks and motorcycles, more than 2008 and 2009 combined.

But auto dealers such as Huffines are in for the long haul, and he sees reasons for guarded optimism. “We’re hopeful that [2009] is going to be the low point. 2010 is going to see an increase — but not back to the numbers for 2007.”

Drury also sees “pent-up demand from people waiting to buy a new car, perhaps waiting for the economy to get better or a new job.”

“People are becoming more frugal through the recession and are maybe stretching out their purchases,” Huffines says. “We provide service and that’s a big part of our business, too. But although vehicles are lasting longer, they do eventually wear out. People will still need cars and we’ll still be selling cars.

“We can’t really predict the future,” he says. “But I’m optimistic the worst is behind us.” FN

The Environmental Protection Agency tests every passenger car and truck sold in the U.S. for fuel consumption. The results of the EPA fuel economy tests are available at

Further Per Gallon

Between 2005 and 2010, fuel efficiency improved in the majority of vehicles sold in Texas. SUVs had the biggest percentage improvement, with vehicles sold in 2010 averaging 11.1 percent better fuel efficiency than those sold in 2005.

Change (%)
SUV16.117.9 11.1%
MIDSIZE CAR20.923.110.6%
FULL-SIZED TRUCK14.815.97.9%

Source: Edmunds Inc. and Texas Comptroller of Public Accounts

Hybrid Vehicles Registered in Texas

According to the Texas Department of Motor Vehicles, the number of hybrid vehicles registered in Texas has risen by more than 1,400 percent since April 2004. Even so, they still account for just a half-percent of all vehicles in the state.

in Texas
Jan 201078,010
Oct 200977,988
Jul 200976,444
Apr 200972,403
Jan 200967,617
Jul 200862,050
Apr 200856,854
Jan 200852,467
Oct 200748,550
Jul 200744,868
in Texas
May 200738,709
Feb 200733,079
Dec 200621,212
Sep 200618,753
Jun 200616,530
Feb 200614,816
Nov 200513,516
Nov 20046,674
Jun 20045,189

Source: Texas Department of Motor Vehicles

Required Plug-ins